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INSPECTOR GENERAL TEXAS HEALTH AND HUMAN SERVICES COMMISSION TWO-YEAR ROLLING AUDIT PLAN Fiscal Years 2017 - 2018 December 2016
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INSPECTOR GENERAL TEXAS HEALTH AND HUMAN SERVICES COMMISSION
TWO-YEAR ROLLING AUDIT PLAN Fiscal Years 2017 - 2018
December 2016
TABLE OF CONTENTS
INTRODUCTION .................................................................. 3
AUDIT AUTHORITY ............................................................. 4
AUDIT UNIVERSE ............................................................... 5
RISK ASSESSMENT ............................................................ 8
TYPES OF AUDITS ............................................................. 9
AUDITS IN PROGRESS ....................................................... 10
AUDIT PLAN .................................................................... 14
AUDIT REPORTS ISSUED IN FISCAL YEAR 2017 ...................... 21
IG Two-Year Rolling Audit Plan Page | 3
December 2016
INTRODUCTION
The Role of IG
In 2003, the 78th Texas Legislature created the Office of Inspector General to strengthen the
Health and Human Services Commission's (HHSC) capacity to combat fraud, waste, and abuse
in publicly funded state-run Health and Human Services programs.
The Inspector General's (IG) mission, as prescribed by statute, is the "prevention, detection,
audit, inspection, review, and investigation of fraud, waste, and abuse in the provision and
delivery of all health and human services in the state, including services through any state-
administered health or human services program that is wholly or partly federally funded, and the
enforcement of state law relating to the provision of these services."
IG's primary tools for detecting, deterring, and preventing fraud, waste, and abuse are audits
(conducted under the federal "Yellow Book" standard); investigations (conducted pursuant to
generally accepted investigative policies); and inspections (conducted under the federal "Silver
Book" standard).
IG Principles
Vision
To become the leading state IG in the country.
Values
Professionalism, Productivity, Perseverance.
Mission
To detect, prevent, and deter fraud, waste, and abuse through the audit, investigation, and
inspection of federal and state taxpayer dollars used to deliver health and human services in
Texas.
IG Two-Year Rolling Audit Plan Page | 4
December 2016
AUDIT AUTHORITY
Texas Government Code Section 531.102 creates the IG, and gives the IG the responsibility to
audit fraud, waste, and abuse in the provision and delivery of all health and human services in
the state, including services through any state-administered health or human services program
that is wholly or partly federally funded.1
Section 531.102(h)(4) permits the IG to audit the use and effectiveness of state and federal funds,
including contract and grant funds, administered by a person or state agency receiving the funds
from a health and human services agency.2
Section 531.1025(a) permits the IG to conduct a performance audit of any program or project
administered or agreement entered into by the commission or a health and human services
agency.3
Section 531.113(d-1) mandates that the IG investigate, including by means of regular audits,
possible fraud, waste, and abuse by managed care organizations.4 Section 531.102(s) also
recognizes the IG's authority to utilize a peer-reviewed sampling and extrapolation process when
auditing provider records.5
1 Tex. Gov. Code § 531.102(a) (Sept. 1, 2015) 2 Tex. Gov. Code § 531.102(h)(4) (Sept. 1, 2015) 3 Tex. Gov. Code § 531.1025(a) (Sept. 1, 2015) 4 Tex. Gov. Code § 531.113(d-1) (Sept. 1, 2015) 5 Tex. Gov. Code § 531.102(s) (Sept. 1, 2015); See also 1 Tex. Admin. Code § 371.35 (May 15, 2016) wherein the
IG adopted RAT/STATS, statistical software available from the United States Department of Health and Human
Services Office of Inspector General and policies and procedures consistent with the mathematical processes for
sampling and overpayment estimation described in the Centers for Medicaid and Medicare Services Program
Integrity Manual.
IG Two-Year Rolling Audit Plan Page | 5
December 2016
AUDIT UNIVERSE
The audit universe represents an inventory of all potential areas that can be audited, which are
commonly referred to as auditable units. The IG Audit Division defines its audit universe as the
departments, programs, functions, and processes within the Health and Human Services (HHS)
System, including services delivered through managed care, and services delivered through
providers and contractors.
HHS System6
Administrative Services
Information Technology
Financial Services
Procurement and Contracting Services
System Support Services
Legal
Programs
Medical and Social Services
Policy and Performance
Transformation
Department of Aging and Disability Services
o Regulatory Services
o State Supported Living Centers
o Program Operations
Department of Family and Protective Services
o Child Protective Services
o Adult Protective Services
o Statewide Intake
o Prevention and Early Intervention
o Child Care Licensing
o Program Operations
Department of State Health Services
o Regulatory Services
o Disease Control and Prevention Services
o Regional and Local Health Services
o Family and Community Health Services
o State Hospitals
o Program Operations
6 Based on the HHS System organizational charts effective September 1, 2016.
IG Two-Year Rolling Audit Plan Page | 6
December 2016
Managed Care
Managed Care Entities and Subcontractors
Managed Care Organizations
Dental Maintenance Organizations
Behavioral Health Organizations
Pharmacy Benefit Managers
Third Party Administrators
Managed Care Programs
Children’s Health Insurance Program (CHIP)
Texas Dual Eligible Integrated Care Project (Medicare-Medicaid Plans)
STAR
STAR+PLUS
STAR Kids
STAR Health
NorthSTAR7
Services Delivered Through Providers and Contractors
The audit universe includes the services delivered through providers and contractors that support
the HHS System programs and managed care sections listed above. These services are
categorized into two groups: (a) Medicaid and CHIP services, and (b) other services.
Medicaid and CHIP Services
The list of Medicaid and CHIP services was compiled by reviewing the Medicaid and CHIP
expenditures included in the U.S. Department of Health and Human Services Centers for
Medicare and Medicaid Services (CMS) 64 reports and CMS 21 reports.
Behavioral Health Services
Case Management (Primary Care &
Targeted)
Clinic Services
Critical Access Hospital Services
Dental Services
Diagnostic Screening and
Preventative Services
Emergency Hospital Services
Emergency Services for
Undocumented Aliens
7 NorthSTAR program ends December 31, 2016.
EPSDT Screening Services
Family Planning
Federally-Qualified Health Center
Services
Freestanding Birth Center Services
Health Home for Enrollees with
Chronic Conditions
Health Services Initiatives
Home and Community-Based
Services
Home Health Services
IG Two-Year Rolling Audit Plan Page | 7
December 2016
Hospice
Inpatient Hospital Services
Inpatient Mental Health Facility
Services
Intermediate Care Facility Services
(Private & Public)
Laboratory and Radiological
Services
Medical Equipment
Medical Transportation
Non-Emergency Medical
Transportation
Nurse Mid-Wife
Nurse Practitioner Services
Nursing Facility Services
Occupational Therapy
Other Care Services
Other Practitioners Services
Outpatient Hospital Services
Outpatient Mental Health Facility
Services
Personal Care Services
Physical Therapy
Physician and Surgical Services
Prescribed Drugs
Private Duty Nursing
Programs of All-Inclusive Care
Elderly
Prosthetic Devises, Dentures, and
Eyeglasses
Rehabilitative Services (non-school-
based)
Rural Health Clinic Screening
Services
School Based Services
Services for Speech, Hearing, and
Language
Sterilizations
Therapy Services
Tobacco Cessation for Pregnant
Women
Translation and Interpretation
Vision
Other Services
Other services includes services provided by the HHS System programs that are delivered
through providers and contractors for which there is no federal financial participation through
Title XIX (Medicaid) or Title XXI (CHIP).
IG Two-Year Rolling Audit Plan Page | 8
December 2016
RISK ASSESSMENT
The IG Audit Division conducts a continuous risk assessment to identify potential audit topics
for inclusion in its Two-Year Rolling Audit Plan. Potential audit topics consist of programs,
services, providers, and contractors with an elevated potential for fraud, waste, and abuse.
We identify potential audit topics from a variety of methods, such as:
Coordinating with the HHS Internal Audit Divisions
Reviewing past, current, and planned work performed by external organizations, which
include
o Texas State Auditor's Office (SAO)
o U.S. Department of Health and Human Services Office of Inspector General
(DHHS OIG)
o U.S. Department of Agriculture Office of Inspector General (USDA OIG)
o U.S. Government Accountability Office (GAO)
o U.S. DHHS Centers for Medicare and Medicaid Services (CMS)
Conducting interviews with HHS management and staff, and external stakeholders
Coordinating with the IG Inspections Division and IG Investigations Division
Reviewing the results of external reviews conducted on managed care organizations
Analyzing data of services delivered through providers and contractors
Viewing relevant Texas Legislature Hearings
Requesting referrals from within the IG, the HHS System, and the public8
After compiling the list of potential audit topics, the IG Audit Division considers several factors
to select audits for its Two-Year Rolling Audit Plan:
Requests from the legislature and executive management
Current oversight activities, including internal and external audits
Public interest
Available resources
8 The public are encouraged to report suspected fraud, waste, or abuse by recipients or providers in Texas HHS
programs by calling the IG toll-free Integrity Line at 1-800-436-6184 or submitting a referral online:
https://oig.hhsc.texas.gov/report-fraud
IG Two-Year Rolling Audit Plan Page | 9
December 2016
TYPES OF AUDITS
The IG Audit Division conducts risk-based performance, provider, and information technology
audits related to (a) services delivered through medical providers and contractors and
(b) programs, functions, processes, and systems within the HHS System, to help identify and
reduce fraud, waste, abuse, and mismanagement. While there are sometimes variations in which
audit type is performed for a given entity being audited, the categories are generally defined as
follows.
Performance Audits - Review the effectiveness and efficiency of HHS System program
performance and operations. The IG Audit Division makes recommendations to mitigate
performance gaps and risks that could prevent HHS System programs from achieving
their goals and objectives. These audits may make recommendations that funds be put to
better use.
Provider Audits - Assess contractor or medical service provider compliance with criteria
contained in legislation, rules, guidance, or contracts, and to determine whether funds
were used as intended. These audits may identify questioned costs or unsupported costs.
Information Technology Audits - Assess compliance with applicable information
technology requirements and examine the effectiveness of general and application
controls for systems that support HHS System programs or are used by contractors or
business partners who process and store information on behalf of HHS programs. These
audits may make recommendations for information technology control improvements and
to mitigate security vulnerabilities.
IG Two-Year Rolling Audit Plan Page | 10
December 2016
AUDITS IN PROGRESS
Performance Audits
Medicaid and CHIP Managed Care Organization Special Investigative Units - SIU
Resources, Activities, and Infrastructure
Objective
Determine the effectiveness of managed care organization (MCO) special investigative units
(SIU) performance in (a) preventing, detecting, and investigating fraud, waste, and abuse, and (b)
reporting reliable information on SIU activities, results, and recoveries to HHSC.
Scope
MCO SIUs for the period of September 2013 through August 2016, to include:
Processes and activities that support SIU fraud plans at Medicaid and CHIP MCOs and
subcontractors.
Policies and practices supporting the reporting of SIU activities and results to HHSC.
Information technology systems that support SIU processes, and related data.
Performance of Contractors Selected as Sole Source Procurements over $10 Million
An audit of one HHS agency contractor is being performed.
Objective
Determine whether (a) funds are used as intended and (b) contractors are performing in
accordance with contract requirements.
Scope
The most recent 12 to 18 months, to include:
Contractor and subcontractor processes and activities that ensure contract requirements
are met and funds are used as intended.
Policy and practices supporting contract deliverables and performance measures.
Information technology systems that support the reporting process, and related data.
IG Two-Year Rolling Audit Plan Page | 11
December 2016
Utilization Management in Managed Care Organizations
Audits of three health plans are being performed.
Objective
Evaluate the effectiveness of acute care utilization management practices at selected MCOs in
ensuring that health care services provided were (a) medically necessary, (b) efficient, and (c)
comply with state and federal regulations.
Scope
Acute care utilization management practices and processes effective during the period
September 2013 through August 2015.
Activities of subcontractors involved with, or contracted to perform, utilization
management practices and processes on behalf of the MCO.
Assessment and Evaluation Practices at Long Term Care Nursing Facilities
An audit of one nursing facility is being performed.
Objective
Determine whether therapy services are provided consistent with physician orders and in
accordance with resident assessments and evaluations.
Scope
The assessment, evaluation, and billing for therapy practices for March 2015 through July 2016.
Texas Association of Local Governments Financial Review
Objective
Review contractor's adherence to requirements for contracts with HHS System agencies.
Determine whether State funds were used as intended according to contractual
requirements and recover State funds, if applicable.
IG Two-Year Rolling Audit Plan Page | 12
December 2016
Scope
For the period of September 2014 through March 2016, to include:
Conducting site visits to contractor's locations to observe and evaluate activities relate to
the audit objectives.
Reviewing 100 percent of financial transactions for the contracts within scope to verify
validity, completeness, and accuracy.
Processes for Identifying and Preventing Eligibility Determination Errors
Preliminary Objective
Evaluate activities designed to identify and mitigate eligibility determination errors for SNAP,
TANF, Medicaid, and CHIP, including specific practices for:
Preventing or minimizing errors resulting in incorrect eligibility determinations.
Identifying and resolving incorrect eligibility determinations caused by agency error.
Provider Audits
Selected Vendor Drug Program Pharmacy Providers
An audit of one pharmacy is being performed.
Preliminary Objective
Determine whether the vendor properly billed the Texas Medicaid Vendor Drug Program and
complied with contractual requirements and federal and state regulations, including Texas
Administrative Code rules.
Selected Durable Medical Equipment Providers
Preliminary Objective
Determine whether selected durable medical equipment (DME) providers billed and were paid
for services and supplies in accordance with state and federal regulations and guidelines.
IG Two-Year Rolling Audit Plan Page | 13
December 2016
Selected MCO Speech Therapy Providers
An audit of one provider is being performed.
Preliminary Objective
Determine whether speech therapy providers:
Comply with Texas Medicaid provider enrollment guidance and applicable licensure and
certification requirements.
Follow criteria established for determining when discontinuation of therapy is
appropriate, in terms of:
o Duration
o Total number of visits
Information Technology Audits
Claims Management System IT Interfaces
Objective
Evaluate the adequacy of IT interface processing controls designed to:
Ensure data transmitted and processed is valid, complete, and accurate.
Protect data from unauthorized access, modification, and deletion.
Scope
Claims submitted for payment in March 2016 and June 2016.
Processes and controls over Medicaid provider claim payment data processed and
transmitted to and from relevant automated systems.
Monitoring and oversight of contractor activities relevant to the audit objective.
IT Security Assessment
An audit of one application is being performed.
Preliminary Objective
Assess the effectiveness of logical and physical security controls over confidential information
stored and processed.
IG Two-Year Rolling Audit Plan Page | 14
December 2016
AUDIT PLAN
The HHS System currently has over 54,000 employees responsible for managing approximately
$44.2 billion each year, and includes over 200 programs providing needed services to millions of
Texans.9 These programs are subject to federal and state regulations, statutes and rules, and
HHS agency and program policies. The programs, and the administrative and technical support
that enables them to function, are subject to funding constraints, policy changes, and changing
priorities. As a result, risks associated with functions within the HHS System are constantly
changing.
In an effort to be responsive to continuously changing risks and an evolving environment, the IG
Audit Plan contains two components. The first component focuses on the short term, and is used
in conjunction with a schedule of current audit projects and available staff to guide the utilization
of audit resources within the upcoming six-month period of time. The audit projects listed in the
section called “Audits IG Plans to Initiate During the Next Six Months,” while still subject to
change when needed to address near-term changes in the audit environment and to accommodate
executive management requests for audit services, is intended to represent the roadmap the IG
Audit Division plans to follow for the next several months. Audit projects will be planned and
initiated based on current priorities and availability of audit staff members needed to form audit
teams.
The second component, called “Potential Audit Topics - Fiscal Years 2017 Through 2018,”
covers the balance of the two year period. This section, which includes potential audit topics that
represent possibilities for future audit consideration, is updated with each new version of the
rolling audit plan, which will occur in three month intervals. Some potential topics will fall off
the list, and others will be added, reflecting changing risks and priorities.
The two components of the IG Rolling Audit Plan follow.
9 $44.2 billion represents the sum of the fiscal year 2016 HHS Agency Operating Budgets, which is approximately
$38.9 billion, in addition to the amount reported for Supplemental Nutrition Assistance Program (SNAP) benefits in
the State of Texas Schedule of Expenditures of Federal Awards for the year ended August 31, 2015, which is
approximately $5.3 billion.
IG Two-Year Rolling Audit Plan Page | 15
December 2016
Audits IG Plans to Initiate During the Next Six Months
Proposed audit projects are listed below. While IG anticipates it will initiate the audits listed
below during the next six months, changing risks and priorities could result in some of the
planned audits not being initiated, or in other audits, not listed below, being initiated.
Performance Audits
STAR+PLUS Enrollment
Managed Care Pharmacy Benefit Manager Compliance
Performance of Third Party Recovery Contractor Managed by Claims Administrator
Dental Service Organizations (Informational Report)
Dental Management Organizational Comprehensive Review
HHS System Collections
Provider Audits
Selected Vendor Drug Program Pharmacy Providers
Selected Durable Medical Equipment (DME) Providers
Hospital Cost Reports
Selected MCO Speech Therapy Providers
Selected Home Health, Personal Care Services, and Home and Community-Based
Services Providers
Assessment and Evaluation Practices at Selected Long Term Care Nursing Facilities
Selected Women’s Health Program Providers
Selected Delivery System Reform Incentive Payments (DSRIP)
340b Program in Federally-Qualified Health Centers (FQHCs)
IG Two-Year Rolling Audit Plan Page | 16
December 2016
Information Technology Audits
IT Security at Selected Contractors and Business Partners, and for HHS agency systems
and applications
IG Two-Year Rolling Audit Plan Page | 17
December 2016
Potential Audit Topics - Fiscal Years 2017 Through 2018
The potential audits listed below are organized by program, process, or business area. The IG
Audit Division will update this list, based on changing risks and priorities, each time it issues a
new rolling audit plan. When IG plans to initiate a proposed audit listed in this section within
the following six months, it will remove the proposed audit from this section and list it in the
previous section, called “Audits IG Plans to Initiate During the Next Six Months.”
Medicaid
Managed Care
Accuracy and Usability of MCO Scorecards
Expedited Credentialing by MCOs
MCO Adjustment of Encounters After Collecting Overpayments from Providers
Cost Allocation of MCO Shared Services
Physician Administered Drug Rebate Processes in MCOs
MCO Behavioral Health Initiatives Funded With Medicaid Dollars
MCO Support for Quality Payments
MCO Prior Authorizations
Retrospective Utilization Management
Validity of Information Reported in MCO Deliverables
Quality and Completeness of MCO Encounter Data
Follow-up on MCO Corrective Action Plans
Duplicate Payments to MCOs
MCO Third Party Recovery Performance
IG Two-Year Rolling Audit Plan Page | 18
December 2016
Medicaid Claims Administrator
Prior Authorization Processes
Effectiveness and Monitoring of Medicaid Claims Administrator Key Performance
Indicators
Pharmacy
Drug Destruction Practices at Selected Long Term Care Providers
Selected Vendor Drug Program Pharmacy Providers
Pharmacy Cost Methodologies (Informational Report)
STAR+PLUS
DME in STAR+PLUS
Recovery of Assets From Long Term Care Residents in Medicaid
STAR Kids
STAR Kids Implementation
Hospital
Hospital Audit (Topic to be Determined)
CHIP
CHIP Complaint Process
Eligibility
Duplicate Eligibility in TIERS
TIERS Access Controls
TIERS Processes and Workflows
Application and Database Security Assessment for TIERS
Effectiveness of TIERS Manual Workarounds
IG Two-Year Rolling Audit Plan Page | 19
December 2016
SNAP
Out of State SNAP Expenditures
Able-Bodied Working Adults Without Dependents
Application and Database Security Assessment for Electronic Benefit Transfer (EBT)
Effectiveness of Edits Checks and Other Controls Related to Issuance and Activation of
EBT Cards
EBT Contract Procurement
SNAP Eligibility Interfaces
TANF
Accuracy of TANF Eligibility and Payments
TANF Eligibility Interfaces
Foster Care
Intake Processes - “V” (Victim) Coding on Medical Records
Foster Care Psychotropic Medication Utilization and Monitoring
Miscellaneous
Medically Dependent Children Program (MDCP) Enrollment
School and Health Related Services (SHARS)
Selected MHMR Contracts and Related Providers
Grants Management Processes at the Department of State Health Services
Selected Consumer Directed Services Providers
Selected Early Childhood Intervention Services Providers
Selected Family Violence Program Services Providers
Selected Client Services Providers
IG Two-Year Rolling Audit Plan Page | 20
December 2016
Prescription Waste in Nursing Facilities
Electronic Visit Verification (EVV) Contractor Performance
Potential Duplicate Payments for Services Covered by STAR Health Procured Under
DFPS Child-Specific Contracts
-- Reminder of page left blank --
IG Two-Year Rolling Audit Plan Page | 21
December 2016
AUDIT REPORTS ISSUED IN FISCAL YEAR 2017
IG issued the following audit reports between September 1, 2016 and November 30, 2016.
Audit Report Issue Date Key Findings
Acute Care Utilization
Management in Managed Care
Organizations (MCO) -
Superior HealthPlan, Inc.
November 30, 2016 Prior authorization request determinations did
not consistently meet timeliness requirements
Electronic prior authorization data was not
reliable for measuring timeliness
Noncompetitive Contractor
Procurements Over $10
Million - Alamo Area Council
of Governments (AACOG)
November 30, 2016 Improve AACOG's equipment accountability
and inventory processes
Medicaid and CHIP MCO
Special Investigative Units
(SIU) - Christus Health Plan
November 22, 2016 Scope of SIU investigation activities was
limited
SIU activities necessary to detect fraud, waste,
and abuse were not performed
Noncompetitive Contractor
Procurements Over $10
Million - PerkinElmer Health
Sciences, Inc.
November 22, 2012 DSHS should post an open market solicitation at
the end of the current contract term to determine
whether PerkinElmer remains the best value
offer for the state
Clinical Research Study to
Treat Traumatic Brain Injury
and Post-Traumatic Stress
Disorder in Veterans Brain
Synergy Institute (BSI)
November 22, 2016 The audit identified $278,441 in overpayments
to BSI for failing to follow the requirements of
the contract as amended and for treating the
same participants multiple times
BSI was not properly vetted and monitored to
ensure that it complied with the contract
